Exam II Review Exercises - Key

Exam II Review Exercises - Key - ACCT 320 Problems Notes...

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ACCT 320 Exam II: Additional Review Problems Notes Receivable Using the Effective Interest Method On January 1, 2008, Jet Company made a loan to Smith Company. The face value of the three-year loan was $100,000 and it had a 12% stated rate of interest. The loan was issued at $104,974 to yield 10%. Interest is received annually on December 31. 1. How much cash interest will be received at the end of the first year? 100,000 * 12% = $12,000 2. What is the carrying value of the loan at 12/31/09? $101,818 Cash Interest Interest Income Premium Amortized Unamortized Premium Carrying Value 4974 104974 12/31/08 12000 10497 1503 3471 103471 12/31/09 12000 10347 1653 1818 101818 12/31/10 12000 10182 1818 0 100000 3. How much interest income will be earned in 2010? $10,182 4. How much interest income will be recognized over the life of the loan? $10,497+$10,347+$10182 = $31,026 or $100,000 maturity value + $36,000 cash payments for interest = $136,000 - $104,974 cash received = $31,026 Inventory Errors Determine the 2010 financial statement impacts of the following inventory errors made by Dwight Company. Assume Dwight uses a periodic inventory system:
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This note was uploaded on 11/22/2010 for the course ACCT 320 taught by Professor Alee during the Spring '10 term at Kansas State University.

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Exam II Review Exercises - Key - ACCT 320 Problems Notes...

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